Now the overheated steam has escaped from the online economy, it's easier to see clearly what the advantages and disadvantages of e-commerce are over the old ways of retail. If you decide it's a good idea for your current or future enterprise, it's also easier to see how to make it happen: if some of the pioneering thrill has gone from the gold rush, then so have some of the rattlesnakes.

The biggest upside of e-commerce, even for the smallest business, is that it's a brand new channel to the customer -- one that is potentially available all the time, all the way around the world. The second most important advantage is that it can increase sales and admin efficiency. The downside is that e-commerce requires good judgement to set a strategy that is sustainable and scaleable as your company changes, but that doesn't cost too much or require too much maintenance.

This requires technical knowledge -- even if you choose to farm out some or all of your e-commerce requirements to third parties, you need to know enough to assess their proposals and be sure they are behaving reasonably. It also requires clarity in understanding how your own business works: many e-commerce projects have foundered because this was lacking or ignored.

E-commerce can be thought of as groups of people going through well-defined actions together. The people break down into customers, suppliers (also called merchants), makers and receivers of payments -- almost always banks or similar institutions, a payment scheme provider and a certification authority. Just about every retail e-commerce transaction involves somebody in each of those roles.

A typical chain of events happens when a new customer comes to your Web site for the first time. Customer and supplier -- that's you -- have to agree on conditions, which can be as simple as making sure they see a link to your standard terms before they go any further. Then the customer has to find what they want to buy and pay for it -- pretty much all they'll see of your system. You'll need to have your returns and refund, tax declaration, stock management and problem resolution systems. If you can't sketch out these processes and how they relate to each other, you're not ready to think about putting them online.

Once you've got your plans clear, there are many options for implementation. At one end of the spectrum, you can buy in developers and write everything from scratch. At the other, you can hang out your shingle on eBay and run your entire business using a Web browser and PayPal from an Internet café. This might seem hopelessly amateurish compared to places like Amazon.com, but a whole subculture of small businesses have sprung up supporting this approach and it has much to commend it in terms of low risk, low outlay and initial cash flow.

Most companies will opt for something more formal. Many ISPs offer packages of services and software for off-the-shelf e-commerce, usually with a range of features corresponding to a range of prices. @UK Plc (www.uk-plc.net) is typical, charging around £50 per year for a one-page, one-product site with credit card payments and automatic invoicing, up to £360 per year for a 2,000-page, unlimited-product site. Like many, the company also offers to maximise the exposure your site will have to the various online search engines -- understanding how Google prioritises things it finds can be very important, as the majority of your customers can easily come from this method.

If you do go for a complete e-commerce package, check the terms of the deal carefully: you'll want guaranteed up time with good compensation if the company fails to deliver the service for any length of time. Ask about the price and ease of expanding your site as your business develops, and in particular ask for references from other companies using the service you're investigating. Nothing is a better guide to an ISP's competence than long-term customers.

If your company is already IT-savvy and has some experience of developing software, there are any number of options for building your e-commerce systems from open or proprietary tools. On the open side, you can use things like the Axis Web services toolkit for Java, and the JBoss open-source J2EE application server, which like others uses the Web Services Invocation Framework. You'll need skills with Perl, Python, XML and Soap as well as more traditional languages to be able to use these, but it's an active market with many support and training options. Worth considering if your e-commerce business plan involves ideas that won't fit easily into off-the-shelf packages, but beware: even open-source development needs considerable commitments in time and money.

You'll also have to consider hosting options: traditionally, even medium-sized companies have relied on managed remote hosting where a third party takes care of all the technicalities off-site. However, with the increase in inexpensive broadband connectivity it's becoming more feasible to host your site on your own servers in your own offices. As with any business critical service that means a responsibility to keep them running even when things go wrong, which is expensive, complicated and hard work. It may be worth it, but be aware of all the potential problems with hardware, power, software, office disasters and communication breakdowns.

E-commerce is here to stay, and it's becoming an essential part of any business. Be aware of all the options, and never accept assurances you don't understand.

Follow these links for more of ZDNet UK's special feature about e-commerce:

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